Over the years, some people have asked me why real estate agents take overpriced listings.
If you are not working in the industry, it is probably hard to figure out why anyone would consider this an intelligent practice.
This is one of the dirty little secrets within the business.
A surprising number of real estate agents out there will attempt to sell overpriced properties for owners, even when the agent knows the home is priced too high.
These real estate agents will accept these overpriced homes even though it goes against the basic principles of ethical practices.
By doing so, they hurt their reputation, mislead sellers, and create a hassle for their peers. So why do they do it?
Reasons a Real Estate Agent Will Overprice a Home
There are a few common reasons why:
- They are not skilled in the art of correctly pricing a home. Placing value on a property comes from years of experience. Some are good at it, and others are not!
- The agent may use far too simplistic valuation methods like calculating price per square foot that do not work in determining accurate market values.
- The real estate agent does not possess the skills to beat another agent they are up against in an interview, so they resort to telling the owner “what they want to hear.” They are playing on human nature – we all want and believe our homes are better than the next. In this case, they intentionally mislead the seller on the home’s market value.
- The Realtor uses the overpriced home to get buyer clients from their marketing activities. They then sell these customers and pick up a different home. This is extremely common and one of the biggest reasons Realtors take homes priced too high!
- The seller is unwilling to face the reality that their home is not worth what they think it should be priced. The agent doesn’t have the fortitude to turn them down.
These are the five most common reasons real estate agents take overprice listings. Below, I will give you an in-depth overview of each situation so you understand why a Realtor would consider taking an overpriced home.
Sellers need to understand the consequences of pricing too high, including losing potential profit. From three decades of experience, properties that are priced correctly out of the gate always sell for more money.
Overpriced Listings – The Temptation
Real estate agents are people, and people are known to make decisions that do not always make sense.
Even with proper training and education in the realities of real estate transactions, some Realtors can’t help themselves when they see the temptation of a potential client.
These agents will say whatever is necessary to get a homeowner to work with them, even quoting prices that have nothing to do with reality.
It only takes a few Realtors doing this to convince a seller their home is worth more than it is.
Real estate is a very competitive industry.
Unfortunately, this creates an environment where Real Estate agents do whatever they can to ensure they win, including giving sellers pie-in-the-sky numbers.
Remember, Real Estate is a commission-based business, so if an agent loses the interview, they come away with nothing but a sense of disappointment.
This alone can cause real estate agents to make destitute decisions, including their noses growing like Pinocchio’s.
One-Upping The Competition
If a seller interviews three agents, the first agent may quote a price that reaches a little high but is at least in the ballpark of what the house is worth.
But then the following real estate agent interviewed, knowing they are up against other agents, wants to outdo the first agent, so they quote an even higher price.
By the time the third agent is interviewed, the price of the home has reached an unrealistic level.
Telling Sellers What They Want To Hear
Sometimes, the problem starts with the seller. An agent may walk into a situation where the seller is sure that his home is worth far more than it is.
The homeowner may think they should, too, because his neighbor’s house sold for a certain amount. Never mind that the other house was fully renovated, on a much larger lot, and is in far better condition.
Other times, the seller has looked at an online home value estimator like Zillow or Redfin, and they believe the inflated value. Some may have even read articles warning how off the Zillow value estimates are compared to the actual value.
A reputable agent will tell it to the seller like it is and deal with the consequences – like missing out on the listing. But not all Realtors have the experience, the willpower, or sometimes the integrity to be honest with this kind of homeowner.
They know how to determine a home’s value, but they can’t resist having another listing when push comes to shove.
A Lack Of Integrity
Not every Realtor who takes on overpriced listings is a terrible person. However, the reality is that specific Real Estate agents suffer from a lack of integrity. Real Estate agents are human, and it is not difficult to reach the point where you can call yourself a Realtor.
To become a Realtor, you need to follow a strict code of ethics. Part of that code means you can’t deceive a home seller.
Being a good Real Estate agent is hard work, but not every agent is willing to do that. Some are happy to say anything to get a client, even if the customer suffers.
What Are The Benefits Of Taking An Overpriced Listing?
An overpriced listing will rarely sell. Real estate agents know this. So why do specific agents accept and even encourage such listings?
Advertising
The real estate agent does not have to sell the home to benefit from taking on the listing. As soon as the agent accepts the listing, they can put a sign in the home’s yard for sale.
The agent’s number, email, and website will be on this sign. Maybe even a picture. Depending on where the home is located, many potential clients will view this little billboard.
This helps get business elsewhere. It makes the phone ring for the agent. Do they need your home to sell? No!
Open Houses
Some sellers expect an open house even though they are one of the biggest wastes of time for the owner.
The kind of agent that takes on an overpriced listing will likely encourage an open house since it allows another opportunity for them to meet with potential clients.
Even though an open house is one of the least effective avenues for selling a home, an agent who needs clients will push to have them. Trust me, they are not doing it because they believe some dope will be coming in willing to pay the asking price.
The agent knows no one walking through the home door who doesn’t already have an agent will likely purchase it.
But they may be interested in buying another home, and the agent will have other listings to steer the buyer towards.
Potential sellers come to open houses, too, to get an idea of what homes are going for in their area.
The Realtor can pick up these sellers as clients as well. Open houses have always been more fruitful for a Realtor than a homeowner. Genuine buyers schedule appointments with real estate agents!
There are many reasons why showings with real estate agents are better than an open house where anyone with a pulse can appear! This is one of the dirty little secrets of the real estate industry. Open houses are entirely unnecessary to sell a home!
Fishing By Price
The reality of real estate today is most people shop for homes online. However, these buyers usually do not know a home is overpriced until they get to the house and view it in person.
The Real Estate Agent can also place an ad in the newspaper or a magazine that leaves out the address of the overpriced listing. Buyers ready to buy a home for the price in the paper may call the agent. These buyers are ideal clients – people will spend money on a house, sometimes a lot of money.
The Realtor then only needs to steer these callers toward their other listings or even another agent in a similar price range – listings they will want to buy.
The Realtor Still Wants To Sell The House
When the Realtor accepts an overpriced listing, in the back of their mind, there is the understanding that, eventually, the home will sell if the owner drops the price. If the agent waits long enough, a commission will be coming.
They will need to work a little harder for it to happen. This kind of agent will spend much time badgering the seller for price reductions every week. Remember that this was their strategy to get the listing, so they are used to it.
Unfortunately, the outcome will probably be bad for the homeowner. Homes on the market for an extended period often get a bad reputation. Extended days on the market are the seller’s enemy.
Buyers assume that something is wrong with such homes, and when they finally make an offer, it is low. The agent is prepared to make much less money than initially quoted, but the seller is not.
Bad Agent Reputation
Some agents have a well-deserved reputation for being unprofessional. Those real estate agents who constantly take overpriced listings become well-known in their community.
As you can imagine, sellers who hire these agents often get saddled with the real estate public thinking their home is overpriced. It is called guilt by association.
Real estate agents should not take overpriced listings, but they do. Sellers should educate themselves on the realities of home pricing and seek out only reputable real estate agents.
Failing to do so is almost always costly in the long run.
Consequences For The Seller
So what are the consequences for the seller or overpricing a home? The seller can always drop their price, right? No big deal, right? Wrong! As mentioned above, homes on the market for an extended period become stigmatized.
It is a fact homes priced incorrectly out of the gate sell for less than those that are correctly priced. You can see what happens with overpriced homes by reading this comprehensive article.
This leads to the question of how to know your home is overpriced. Some everyday things can be readily observed with homes priced higher than they should be.
Recognizing your mistake as soon as possible and making necessary adjustments is essential. Incorrect pricing is one of the most significant home seller mistakes that are hard to overcome.
Nothing will prevent a home sale from happening more than an improper price.
Hopefully, by now, you understand that working with a real estate agent who will take an overpriced listing is never wise!
The Damages Overpricing a Home Causes Sellers
Overpricing a home can lead to several issues for sellers. Here’s a list outlining these problems:
- Prolonged Market Time: Homes priced too high may stay on the market longer than average. This leads to a stale listing that could deter potential buyers.
- Limited Buyer Interest: Overpriced homes often fail to attract attention in a competitive market, reducing the number of potential buyers.
- Reduced Showings: Fewer buyers will likely schedule showings, leading to less foot traffic and fewer opportunities to sell the home.
- Unfavorable Comparisons: When buyers compare an overpriced home to others in the same price range offering more value, it can make it seem less appealing.
- Difficulty in Appraisals: Even if a buyer agrees to a high price, the home may not appraise at the agreed-upon value. This can potentially cause financing to fall through.
- Increased Selling Costs: The longer a home remains on the market, the more the seller incurs in carrying costs, such as mortgage payments, utilities, and maintenance.
- Negotiation Disadvantages: Buyers may perceive sellers of overpriced homes as unrealistic or difficult to negotiate with. This can lead to lower offers.
- Missed Opportunities: Sellers might miss out on buyers searching within a specific price range that the home could have fallen into if priced correctly.
- Damaged Reputation: Real estate agents and buyers may view the property negatively. It makes it harder to sell the current home, potentially affecting the seller’s future real estate dealings.
- Potential for Market Shifts: If the market cools or shifts to favor buyers, an overpriced home will be even less likely to sell, potentially leading to a price reduction below market value to attract interest.
Addressing the correct price point from the beginning avoids these pitfalls and ensures a smoother, faster selling process.
Additional Helpful Home Pricing Articles
- Home pricing mistakes to avoid – Discover all the pricing blunders to avoid when selling a home via Rochester Real Estate Blog.
- Why a negotiating room is unnecessary – learn why you don’t need a buffer when pricing a property via Frederick Real Estate Online.
- Pricing your home to sell – See helpful advice on accurate property pricing via Cincinnati and Northern Kentucky Real Estate.
Use these additional articles to make intelligent decisions when selling your home. The biggest mistake that can be made when selling a home is to overprice it. Pricing your home wrong out of the gate can cost you thousands of dollars in your pocket!
About the Author: Bill Gassett, a nationally recognized leader in his field, provided information on why real estate agents take overpriced listings. He is an expert in mortgages, financing, moving, home improvement, and general real estate.
Learn more about Bill Gassett and the publications he has been featured in. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of Metrowest towns for the last 38+ years.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
